How long do income protection claims pay out for?

Income protection pays a regular monthly income if illness or injury stops you working, and how long that income lasts is decided by the type of policy you bought, not by how ill you are. Some policies pay until you can go back to work or reach retirement. Cheaper ones pay for a set maximum period, such as one, two or five years, and then stop even if you still cannot work¹.

The other half of the answer is the wait before payments begin. Most policies include a deferral period, and payments start only once you have been off work for that long. Waiting periods commonly run from four weeks up to two years after you stop work, and the options usually offered are 4, 13, 26 or 52 weeks³.

So the length of a claim is really two numbers: how long you wait at the start, and how long the payments can run once they begin. Both are chosen when you take the policy out, and both affect what you pay for it.

Full-term or limited: how long payments can last

The single biggest choice is whether the policy pays for as long as you need it or for a fixed maximum period. A full-term policy pays your cover amount for the full term of the policy, or until you return to work, whichever is sooner⁷. Another insurer describes the same idea: a full term income protection policy provides a regular monthly payment until your policy term ends, when you return to work, or when you pass away, whichever is earliest⁸.

Limited-period policies work differently. Independent guidance notes that cheaper short-term policies may only pay for one or two years, and that options exist for maximum claim periods of one, two or five years, which can make cover more affordable². Choosing a policy that pays out for a set period, such as one or two years, can be cheaper than cover that runs until retirement¹.

The maximum length of a policy itself is set at the outset. One insurer's terms state that the minimum benefit term for income protection is five years and the maximum is 51 years⁵. Another says cover can last until your 70th birthday, or your chosen retirement age if earlier⁹.

What this means in practice is that two people with the same illness can receive very different amounts. Someone on a two-year limited policy who is still unable to work after two years has no further payments from that policy, while someone on full-term cover continues to be paid. The trade-off is cost: the longer the potential payout, the higher the premium.

Payments start only after the deferred period

Before any money arrives, you serve a waiting period. The Financial Ombudsman Service describes it plainly: the deferred period is the amount of time you have to have been off work before the policy will start paying you benefit, agreed when you took out the policy⁴.

The options are fairly standard across the market. One insurer offers a choice of 4, 8, 13, 26 or 52 weeks⁹. Another says you will choose a set deferred period, usually of four, 13, 26 or 52 weeks, bearing in mind that longer periods usually mean lower premiums¹⁰. A third offers 4, 8, 13, 26 or 52 weeks⁷, and a fourth the same set¹¹.

Some policies go further in both directions. One can start paying from day one, 7 or 14 days, or after 1, 3, 6 or 12 months¹². Independent guidance notes that the deferral period can generally range from one to 12 months after you were taken ill, with longer waiting periods often reducing the cost, and that the default is typically 13 or 26 weeks but can be as short as four weeks¹⁴. Citizens Advice puts the outer limit at up to two years after you stop work, with a minimum of four weeks⁶.

There is a practical trap here. One insurer's terms require you to notify a claim within set deadlines that depend on your deferred period: by week 2 of a 4 or 8 week deferred period, by week 4 for 13 weeks, by week 6 for 26 weeks, and by week 12 for 52 weeks⁵. Missing those deadlines can complicate a claim.

Going back to work part time or for less pay

Returning to work does not always end a claim outright. Many policies include a rehabilitation or partial-payment benefit for people who go back in a reduced role or on reduced pay. One insurer says this is usually payable for up to six months after you return to work and forms part of the full sum assured on the policy¹⁰.

The way the reduction is worked out is proportionate. The same insurer gives an example: if you are earning 60% of what you were making, 40% of your income protection benefit would be payable until your earnings reach the level they were at before¹⁰. Another says that if you return to your own occupation part time after a claim, the policy will pay a reduced amount proportionate to your reduced salary until you reach the end of your claim period¹⁵.

Some policies are more specific about what counts as part time. One insurer's terms state that partial payments continue if you return to work for less than 30 hours a week, having worked 30 or more hours before the claim, with new monthly income less than your income before the claim¹⁶.

The length of these partial payments varies. One friendly society plan continues part of your benefit payments for up to a total of five years over the life of the plan, for people returning to work part time or in a lesser paid job after receiving benefit payments for at least three months¹⁷.

For anyone weighing up a phased return, the practical point is that the policy terms, not the employer, decide how much is paid and for how long. It is worth checking the partial-payment rules before agreeing hours with an employer.

Claiming again for the same illness

A common worry is whether one claim uses up the policy. Generally it does not. One insurer states there is no limit to the number of times you can claim, and you can claim more than once for the same illness or injury, though there are restrictions if you have a limited benefit period of 1, 2 or 5 years¹⁸.

Another describes the same position from the other direction: once you recover, the policy stays in place for the length of your policy term, so another claim can be made if a future illness or injury prevents working⁷. Independent guidance notes that these policies allow you to claim as many times as you need to, and that they pay out only when other cover, such as company sick pay, stops protecting you¹⁹.

The restriction to watch is the limited benefit period. If a policy has a maximum claim period of, say, two years, that cap applies to the claim, and a policy that has already paid its maximum may not pay again for a further period. Full-term policies do not carry that particular limit in the same way, because the payment continues while you remain unable to work.

How much of my salary will income protection pay?

The payout is a percentage of your salary rather than a fixed figure. Independent guidance puts typical cover at around 50% to 70% of your salary¹. Insurers describe their own versions differently: one says it pays a fixed monthly amount and usually covers around 80% of your pre-tax salary²⁰, another says you will receive a percentage of your income, usually up to 65% of your wage²¹, and a third describes cover of up to 65% of income on the first band and 55% on income above that⁵.

Some insurers tier the percentage. Independent guidance notes that insurers may pay a higher percentage on the first part of your salary, like the initial £50,000, and a lower percentage on the remainder¹⁴. One insurer gives a worked example: with a £2,500 monthly salary, 75% insured, £325 Universal Credit and £1,250 employer payments, the income protection pays £300 a month, because that then totals £1,875, which is 75% of normal monthly salary¹⁰.

The reason payouts sit below full salary is that the income is tax free⁶. Paying a percentage rather than the whole amount keeps the total you receive from exceeding what you were earning.

Is income protection paid monthly or as a lump sum?

It is a monthly income. One insurer states that payouts are monthly in arrears²², and another repeats the same⁹. That means you are paid after the month has passed, not in advance, so there is a gap between the end of the deferred period and the first money arriving.

This is one of the clearest differences between income protection and other protection products. Critical illness cover pays a lump sum on diagnosis²³. Family income benefit pays a regular monthly amount rather than a lump sum, running until the end of the policy term²⁴. Mortgage payment protection insurance pays a set amount each month, typically for a period of up to two years²⁵.

For budgeting, the monthly-in-arrears timing matters. Someone whose savings will only stretch to the end of the deferred period may find the first payment arrives later than expected.

Will income protection pay if I am unemployed when I fall ill?

Usually not. Income protection replaces lost income if you are unable to work due to illness or injury¹⁴, and it will not usually pay out if you lose your job, are made redundant or choose to stop working². The Financial Ombudsman Service describes the product as protecting your income if you fall ill and cannot work, paying a percentage of your income each month²⁶.

Cover does extend to a wide range of conditions. Independent guidance says income protection covers essentially any illness or disability that leaves you unable to work, including physical conditions such as cancer or a heart attack and mental health conditions including stress¹. One workplace scheme provides income benefits where you are unable to work due to illness or injury for a period of more than 26 weeks²⁷.

If redundancy cover is what you want, that is a separate product. Accident, sickness and unemployment insurance is designed to cover both, and it is worth understanding how it differs from income protection before choosing.

Does income protection pay out if I move abroad?

Cover is restricted by where you live and travel. One insurer's terms state that cover is not provided if the insured person travels or lives outside the home countries or designated countries for more than 13 continuous weeks in any 12-month period, and that cover starts again after 39 continuous weeks back in the home countries⁵. Another sets the same 13-week limit outside the home countries, and adds a limit of more than 26 continuous weeks within the designated countries in any 12-month period¹¹.

This matters for anyone planning to work abroad or spend long periods overseas. The state safety net is also limited: you cannot get many income-related benefits, like Pension Credit and Housing Benefit, if you are abroad for more than 4 weeks²⁸.

Where protection stops

Income protection is not a savings product, so there is nothing to cash in if you never claim. What protects you instead is the regulatory framework around the insurer.

If an insurer fails, the Financial Services Compensation Scheme covers income protection insurance, also known as permanent health insurance or long-term disability insurance. The scheme pays 100% of a claim if the firm failed on or after 3 July 2015, and 90% if it failed before that date²⁹.

If a claim is turned down or handled badly, the Financial Ombudsman Service can look at complaints about income protection insurance⁴. It also handles complaints about personal accident insurance, a related product³⁰.

Free, impartial help is available. Citizens Advice sets out how income protection works and what it covers⁶, and MoneyHelper provides guidance on protection insurance and on what you can claim if you cannot work.